Quote from @Marcus Griffin:
Im closing on my 1st subto deal at $300K(240k mortgage balance, $60k Partial claim balance) Seller interest rate is 3.4% payment is $1900. I'm looking to wrap this to a end buyer for $350k at 9% interest 10% down. Should my wrap loan be for 30 years or should I include a balloon. Rent is $2200 in area. My 1st deal ever. Looking for experienced investor input.
Ok, here is some experienced investor input.
Don't do it in Texas. Yes, yes, I know, it's legal. That isn't even the issue. Do you have $360,000 available to you on short notice if the loan gets called?
You have about 30 days to cure a Due on Sale call.
a. If you do as you suggest you want to do, you no longer own the property. If the loan gets called, you can not force the sale of the property to cover the wrap unless the borrower has violated the terms of the agreement. Then you have to take him through foreclosure, which takes time and money.
b. You no longer own the property, so you can't refinance out of a note call.
c. When taxes increase, when insurance goes up, when other things happen, how do you cover those?
d. You can be sued (and investigated) if you screw things up.
However, if you have available cash on short notice to pay off the underlying note, it isn't a problem. But now, you have defeated the reason for doing the Subject To and have become a lender to someone who probably doesn't qualify for bank financing. So, you could be stuck with that money tied up for the length of the wrap.
